'Global investors remain positive about India'

'Global investors remain positive about India'

Despite the toned-down estimates, Sukumar Rajah, MD and CIO -- Asian Equities, Franklin Templeton Investments, tells Business Standard that India maintains the lead in economic growth vis-a-vis most of its peers and the regulatory risk will reduce.

The current environment is ideal for bottom-up stock pickers, he says.

Edited excerpts:

How do you see the global equity markets panning out over the next few quarters?

Global equity markets are expected to remain volatile, given the overhang from known issues such as Europe's sovereign debt, as well as the ongoing slowdown.

While the situation in Europe remains uncertain, policy makers are unlikely to sit on the sidelines.

Hope for substantial policy response has been supporting markets amidst the negative news flow in terms of Europe and anaemic economic data.

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Image: A boy poses at a laterite brick mine in Ratnagiri district, 360km south of Mumbai.Photographs: Danish Siddiqui/Reuters

'Global investors remain positive about India'

What about India? Do you think the reversal of fund flows seen in July will continue? How do we compare India with the other emerging markets as an investment destination?

The Indian equity markets have bounced back since June, helped by strong foreign inflows.

The sustainability of these flows will depend on global developments, especially policy measures in the developed markets.

The recent macro-economic problems have been largely local in nature and require the government to change the perception on the policy front.

Despite the recent slowdown, India maintains the lead in economic growth vis-a-vis most peers.

The key differentiating factor is obviously the large share of domestic demand in overall gross domestic product, that can help the economy remain relatively resilient in the wake of a sharp slowdown in global economy or deterioration in the Euro zone crisis.

In our view, global investors with a long-term perspective remain positive about India and would look at sharp corrections as buying opportunities.

'Global investors remain positive about India'

What about the banking/financial sector and the valuations these stocks are available at? Are there any stocks that make it to the investment list?

Financial services and private banks have also corrected and hence, on a relative basis, there is value in private banks.

Over the last few years, the RBI has announced varied policy changes with a view to upgrade the system's ability to withstand crisis and improve efficiencies. Some of these changes may be short-term negative for the sector.

However, they are positive from the long-term viewpoint and in that sense we are not unduly concerned.

'Global investors remain positive about India'

The Cabinet Committee on Economic Affairs has taken a few important decisions spanning a host of sectors, such as sugar, power and stake sale in SAIL. Do you see this as a sign of reforms getting back on track?

There seems to be increased urgency within the government to improve policy perception, and we think the government will make some progress to this end in the coming months.

In case of some of the big reform proposals the government is in the process of building consensus -- this could be a time consuming process and hence the timing/pace of changes here may be slow to come by.

We think over the medium to long term, the regulatory risk in India will reduce.